We're raising our price target on chipmaker Arm after its blistering rally

CNBC Finance

3 min read

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch â an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks are on track for a positive finish on Friday, lifting the S & P 500 into the green for the week and putting it on pace for a fourth consecutive weekly gain. Chip stocks are dominating the conversation once again after Intel's strong quarter and comments about the market for central processing units (CPUs). It Graphics processing units (GPUs) made by the likes of Nvidia are still crucial to the AI boom. But the rise of agentic AI is shifting the CPU-to-GPU balance in AI clusters toward a more even mix, according to Intel's CEO, something the market has underestimated. Intel and AMD are typically the first names investors think of when it comes to data center CPUs, but newest Club holding Arm Holdings also deserves a spot in that conversation. The company sells the "blueprints," or the designs for CPUs, and has more recently begun developing its own CPU product. We set a price target of $200 on Arm when we started this new position on Monday. Remarkably, it's rallied more than 30% since then, blowing past our target. We're taking that up to $250, but we are downgrading our rating to a 2. Of course, we're still optimistic on Arm's future, but it would be better to wait for weakness than buy more up here. The company's next earnings report on May 6 should be good based on everything we hear about CPUs, but the stock has gone parabolic, and it's in our discipline not to chase those kind of moves. By the way, rising demand for CPUs likely gives Amazon and Alphabet an added edge over other hyperscalers, thanks to their success developing in-house silicon. Amazon's offering is AWS Graviton, while Alphabet's is known as Google Axion . In more validation of Amazon's chip strategy, Meta said Friday its agreed to deploy at least tens of millions of Graviton cores. Both Graviton and Axion are Arm-based CPUs, meaning Arm collects a royalty on each chip deployed. Get ready for the busiest week of earnings season, with about one-third of the S & P 500 scheduled to report. Within the portfolio, we'll hear from 10 companies: Corning , Starbucks , Alphabet , Amazon , Meta Platforms , Microsoft , Cardinal Health , Eli Lilly , Apple , and Linde . Other big names scheduled to report are Merck , Caterpillar , Chevron , Coca-Cola , SanDisk , and both Visa and Mastercard . In between these reports, there is the Federal Reserve's policy meeting for April, which will be Jerome Powell's final one as Fed chair. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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We're raising our price target on chipmaker Arm after its blistering rally

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